Mia Migneco

Dr. Tolan

MGT- 5130-X1

6 March 2025

Experimental Exercise 3

The two currencies I am looking at are the Canadian dollar and the Euro in comparison to the

U.S. dollar and their movement on the foreign exchange market in the past six months. For the

CAD to USD in September of 2024, the conversion sat at 1 CAD = 0.73597 USD which was

generally a bit of a lower spot at the time. While in comparison the Euro to USD in September of

2024, the conversion sat at 1 EUR = 1.10614 USD. This is likely due to the start of the election

season in the United States. We had just announced a new candidate for our upcoming election

which may have caused some economic and trade relations uncertainty. By October of 2024, the

conversion peaked back to 1 CAD = 0.740972 USD. In comparison by October of 2024, the 1

EUR = 1.11365. However, shortly after November of 2024, the conversion started declining

down to 1 CAD = 0.718724 USD, and in December of 2024 1 CAD = 0.714018 USD. And for

the Euro as well there was a steep decline. In November of 2024, 1 EUR =1.0885, and in

December of 2024, 1 EUR = 1.05784. This is likely due to the presidential election as President

Trump was elected and he stated that he was going to enforce tariffs which would affect

economic and trade relations with Canada and Europe causing the decline in the exchange

market. Between January through March of 2025, the rapid decline continued dropping from 1

CAD = 0.695058 USD to where it currently stands at 1 CAD = 0.69737 USD which is a negative
five percent decrease for the average of the year. And in January of 2025, 1 EUR = 1.03534

USD, and in March to where it currently stands at 1 EUR = 1.07899 which is a negative 0.60%

decrease for the average of the year.

The Canadian dollar’s value has rapidly depreciated over the past six months this is mainly

due to rising uncertainty surrounding trade policies. The widening differential between interest

rates in Canada and the United States is another reason for the drastic decline in the Canadian

dollar. Additionally, exchange rates risk also play an important role in the overall value of the

Canadian Dollar. Overall, the foreign exchange rate risk premium increases when uncertainty is

heightened which is why we see such a drastic decline in the value of the Canadian dollar.

The Euro’s value has had a slight decline over the past six months which could be attributed

to different political and economic factors. Central bank policies are critical for determining

economic growth and inflation rates. Additionally, interest rate differentials are an ongoing issue.

Trade policies also play a major role in the exchange rate, if the Eurozone exports more than it

imports it can strengthen the Euro, however in comparison US tariffs could weaken the Euro.

These changes show how impactful international business is and how intertwined it is. This

could impact me in many ways including imports and exports. There is potential for a lower

price on imported goods from Europe and Canada due to the value of their currencies decreasing;

however, due to President Trump enforcing tariffs, some countries are negotiating terms and

imposing tariffs of their own. Additionally, this could also make U.S. exports potentially more

expensive for European countries and Canada and potentially negatively affect U.S. business.

Another way this could impact me is if I choose to travel to Canada or Europe. When the

Canadian dollar or Euro is weaker, the U.S. dollar will then have a higher value in comparison
meaning that you can travel for less in a sense as the value of the U.S. dollar is worth more. This

can impact travel costs and accommodations, dining, shopping, and entertainment costs. This

means that expenses will be more affordable. People may consider expanding their stays or even

booking travel packages to get an even better deal. This is great for people who are looking to

book a vacation and maybe haven’t been able to afford it. This will also benefit the economy of

Canada and the European countries traveled to as tourism is a major source of income.

The transition from the Gold Standard to the modern currency trading system has significantly

impacted international business and trade in multiple ways. Under the Gold Standard, currencies

were converted to what their equivalent would be in gold, and by doing so it provided a fixed

exchange rate system. This created a stable and predictable environment for international trade,

as businesses could rely on a more consistent currency values when engaging in cross-border

trades. In contrast, this system also had its faults and limitations, such as the inability to adjust

monetary policy to respond to economic changes, leading to rigid economies and occasional

financial crises. The abolishment of the Gold Standard, occurred after the Bretton Woods system

collapsed in the early 1970s, which in turn led to the adoption of the floating exchange rate

system we use today. One of the most significant impacts of this shift in systems is the increased

volatility in currency values. Exchange rates now fluctuate based on various factors, including

economic data, geopolitical events, and market sentiment. While this volatility can pose risks for

international businesses, it also provides opportunities for profit through currency trading. This

system is critical as businesses can now engage in international trade without any restrictions of

a fixed exchange rate. This has led to the expansion of global supply chains, where companies

source materials and components from different parts of the world to optimize costs and

efficiency. Central banks can now adjust interest rates and control inflation, stimulate growth, or
stabilize their economies. This flexibility has been a major crutch for our economy specifically

when responding to economic crises, such as the 2008 financial crisis and the COVID-19

pandemic.

The current floating currency system, while providing flexibility and adaptability, has faced

several criticisms from various stakeholders. Through my research, I believe one of the primary

complaints is the inherent volatility in exchange rates. Unlike the fixed exchange rates under the

Gold Standard, in contrast, the floating rates fluctuate based on market forces these include:

supply and demand, economic indicators, and geopolitical events. This volatility can create

uncertainty for businesses engaged in international trade, as they must constantly monitor and

manage the risk of adverse currency movements. Another major criticism is the potential for

currency manipulation by governments and central banks. In a floating currency system,

countries can intervene in the foreign exchange market to influence their currency's value. This

can also be called “currency manipulation”. This could lead to a country manipulating the value

of its currency to affect and attract countries to buy their exports. This does however lead to trade

imbalances and potential tension between countries. Currency manipulation overall isn't

beneficial for economic stability and isn't ethical in terms of fair trade. Additionally, the floating

currency system is facing criticism for its impact on developing countries. These countries have

weakened economies and currencies making them much more vulnerable to fluctuations in the

exchange rates. Many argue that this system creates more burden, debt, and economic stress for

these developing countries, while disproportionately benefiting the wealthier.

“Canadian Dollar to US Dollar Exchange Rate Chart.” Xe,

www.xe.com/currencycharts/?from=CAD&to=USD&view=1Y. Accessed 5 Mar. 2025.

“Euro to US Dollar Exchange Rate Chart.” Xe,

www.xe.com/currencycharts/?from=EUR&to=USD. Accessed 5 Mar. 2025.

Kapoore, Nikita. “How the EUR to USD Exchange Rate Works: Key Factors and Predictions for

2024.” Currency Solutions - Quick, Easy & Secure Currency Transfers,

www.currencysolutions.com/insights/eur-to-usd-exchange-rate-comprehensive-guide/. Accessed

6 Mar. 2025.

Lioudis, Nick. “What Is the Gold Standard? History and Collapse.” Investopedia, Investopedia,

www.investopedia.com/ask/answers/09/gold-standard.asp#:~:text=The%20gold%20standard%2

0is%20a,the%20U.S.%20dollar%20to%20gold. Accessed 6 Mar. 2025.

“Recent Factors Affecting the Canada-US Exchange Rate.” Bank of Canada,

www.bankofcanada.ca/publications/mpr/mpr-2025-01-29/in-focus-2/. Accessed 6 Mar. 2025.

Velasco, Andrés. “Flexible Exchange Rates and Emerging Markets: By Andrés Velasco.” Project

Syndicate, 26 June 2023,

www.project-syndicate.org/commentary/floating-exchange-rates-by-andres-velasco-2023-06.